Labour announces universal student allowance

ONE NEWS: Labour has fired its first major shot of the election campaign with leader Helen Clark announcing the party will phase in universal student allowances by 2012.

Clark announced the $210 million a year policy at a Otago University student rally on Monday overshadowing an earlier campaign pledge by National leader John Key to put an extra $47 million a year into a "crusade on literacy and numeracy".

Clark says the current parental income test on the allowance would be phased out by January 1, 2012, benefiting 50,000 students aged 18-23.

"Most of these students would receive no allowance under the current rules and need to borrow, receive help from their parents or work part-time, to make ends meet."

The phasing would kick in on January 1 next year, when the threshold will rise from $46,000 to $50,000, but the first substantial movement - to $70,000 - would not occur until the start of 2010.

In 2011 it would rise to $100,000 and would be abolished altogether in 2012.

Clark says 20,000 fulltime students would be better off by 2010, 30,000 by 2011 and 50,000 by 2012.

Clark says across the board allowances would assist Labour's goal of creating a "knowledge-led society".

"This policy means that students will be borrowing less and will be able to move on more quickly from the costs incurred in getting tertiary education to set up their own homes and establish their careers."

The campaign announcement follows Labour's 2005 blockbuster announcement to scrap interest on student loans.

That policy was a big winner, not only with students and graduates, but also with parents and grandparents worried about their children's debt levels.

Although much narrower in nature, Labour insiders believe this policy will have a similar appeal.

Clark says university students were the only group in society expected to borrow for their living costs.

Within students there was also inequity, with those coming from low-income backgrounds leaving tertiary education with the same income earning potential as other students but substantially less debt.

Clark says other restrictions on the student allowance would remain including the student's own earnings, a requirement they study fulltime and that they pass over half their courses.

It would also stay limited to 200 weeks.

She says the policy was being phased in to ensure its affordability.

Earlier Key used a visit to the decile one Kaiti School in Gisborne to announce National would pump an extra $47 million into boosting literacy and numeracy amongst primary and intermediate aged school children.

Key says schools would have the option of using the new targeted funding as they saw fit.